Foes Plan Post-Vote Deals

WASHINGTON—Politicians from both parties are debating ideas on taxes and spending that move the discussion to the right, putting pressure on the White House and top Democrats to work with a newly empowered Republican Party after Tuesday's election.

Politicians from both parties are debating ideas on taxes and spending that move the discussion to the right, with the GOP expected to gain power following Tuesday's election. Laura Meckler discusses.

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Sen. Tom Coburn at the U.S. Capital in August.
European Pressphoto Agency

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Sen. Russell Feingold of Wisconsin, a liberal Democrat who is trailing in his reelection bid, is working with Sen. Tom Coburn (R., Okla.), a tea-party hero, on new legislation to trim billions in federal subsidies and other spending programs, Mr. Coburn said in an interview.

Two other Democratic Senate candidates, Chris Coons of Delaware and Joe Manchin of West Virginia, are bucking the Obama administration's bid to let the Bush tax cuts for the wealthiest Americans expire, as momentum builds for a broader extension of the cuts. Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R., Ky) have suggested they see room for negotiations on taxes and trade.

Mr. Coburn said both parties would feel pressure to respond to voters' apparent desire for spending cuts, giving lawmakers incentives to work together. Democrats "will be looking over their shoulder at 2012," he said. And "if the Republicans don't respond to what the vast majority of Americans want in terms of downsizing and limiting the federal government, I think the Republicans will be history."

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West Virginia's Joe Manchin with President Obama at a memorial service for Sen. Robert C. Byrd at the Capitol in Charleston, W.Va in July.
Associated Press

Democrats are engaged in a sharp internal debate over how—or whether—the president and congressional leaders should work with the GOP, which is favored to take control of the House of Representatives and maybe the Senate. White House officials, who declined to comment, haven't given allies clear signals about their approach, partly because their calculation depends on Tuesday's outcome.

Strategists in both parties see two options for President Barack Obama. He could seek deals on issues including trade, taxes and spending, following the model of President Bill Clinton, who after losing Congress in 1994, compromised with the GOP to overhaul welfare.

Striking deals could help Mr. Obama advance his agenda and run for reelection as a pragmatist. Some Democrats mention education and trade as areas for compromise, both realms where the White House is to the right of key constituencies.

Mr. Obama could also follow the model of Harry Truman, who dug in and successfully portrayed an opposition Congress as obstructionist. That would lay the foundation for a 2012 reelection campaign where the president could draw contrasts with his opponents.

Within the party, Democrats are deeply split over which is the best course. "There are two schools of thoughts. A school of thought to try and reach common ground, and one to just be defiant and hold off and point to the other side," said former Senate Majority Leader Tom Daschle, who serves as an informal adviser to the White House.

A divided government could lead to gridlock. One leading liberal lawmaker, Rep. Henry Waxman, said he couldn't see how the two parties could reach a deal on deficit-cutting "if we're going to cut spending without increased revenues." He said if the GOP gains power and is unwilling to compromise then Mr. Obama's options will be limited. "I don't think [Mr. Obama] has the full choice in the matter," Mr. Waxman said. "It has to do with whether he has a partner."

The president has offered mixed signals on his intentions, suggesting he is open to compromise but then adding during a recent campaign swing that Republicans "can come for the ride, but they gotta sit in back."

White House Chief of Staff Pete Rouse, in investigating the various options, is consulting with people who worked for Mr. Clinton in the mid-1990s. White House aides are debating ideas to reach out symbolically to the GOP, perhaps with a presidential visit to the Capitol or an invitation to Camp David, a Democrat familiar with the details said.

But some Democrats angling for office may be forcing the White House's hand, in particular on taxes. Messrs. Coons and Manchin in recent days said they supported extending all the Bush-era tax cuts that are set to expire Dec. 31. The White House supports keeping them in place only for individuals making less than $200,000 a year or families earning less than $250,000.

"I am committed to extending the Bush tax cuts for 98% of Americans for everybody making up to $250,000, but I would extend them for everyone," Mr. Coons said last week.

Mr. Biden last week appeared to open the door to a deal, possibly by lifting the $250,000 threshold, though officials later said he didn't mean to suggest the White House was open to changing its view. And aides to Mr. McConnell say the GOP leader is open to a compromise to extend the Bush tax cuts for two years, for now.

Mr. Coburn said he and Mr. Feingold were crafting a measure to eliminate about $150 billion a year in subsidies and other forms of "wasteful spending" through 2015. He declined to name specific programs. Mr. Feingold could not be reached. A spokesman noted he has cooperated before on spending cuts.

Other tax issues will also be on the table as the year comes to a close. Lower rates for dividend and capital gains taxes are set to rise, and the estate tax, which has expired altogether, is set to return to higher levels than even most Democrats want.

Meanwhile, the Obama administration has been willing to challenge teachers unions to press for more accountability in classrooms. Many see possible compromise for renewal of the No Child Left Behind legislation.

On trade, the White House appears willing to back accords with South Korea and Colombia, despite strong opposition to the deals from labor unions whose money and members will be crucial for Mr. Obama's reelection campaign in 2012.

Working with Republicans carries risks for the White House. The Democrats' liberal wing is already frustrated by what they see as compromises made during the opening half of his term. Now liberals are arguing for resisting Republicans, saying Mr. Obama will deflate his base voters if he signs onto any agreement that, for example, pares Social Security benefits.

"That would be a war within the Democratic party," said Roger Hickey, co-director of the liberal group Campaign for America's Future.

Centrists counter that looking for areas of compromise will allow Mr. Obama to reclaim the mantle of change that helped propel him to office. "The voters who matter most do not want to see a continuation of the paralyzation of American politics," said Will Marshall, president of the Democratic centrist Progressive Policy Institute. "They think the political system is broken. They want it fixed."

Among Republicans, a consensus has emerged that the GOP must stick to its core principle of cutting spending and lowering taxes. "I don't think the American people are electing a new generation to Washington, D.C., in the hopes that Congress and the White House can get along better," said Rep. Mike Pence of Indiana, chairman of the House Republican Conference.

Still, some House leaders caution about the risk of appearing obstructionist. Senate leaders point to a likely incoming freshman class of experienced government hands who understand the art of compromise. This includes Indiana's Dan Coats, a longtime former congressman, North Dakota's John Hoeven, a governor popular with voters in both parties, and Ohio's Rob Portman, a former congressman and George W. Bush budget official.

A Senate GOP leadership aide said most of the likely freshman "don't fit the 'say no to everything' caricature."

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